The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending?

The stock market volatility set off by concerns over President Donald Trump’s rapidly shifting trade war threatens one of the primary growth engines of the US economy: spending by high-income earners.

The well-to-do bolstered the economy over the past few years, keeping their wallets open even as the Federal Reserve hiked interest rates to stifle inflation, pandemic savings dwindled and lower-income consumers buckled under the strain of higher prices. Much of the spending by rich Americans has been fueled by what’s known as the “wealth effect,” a theory from behavioral economics that says robust stock market gains and rising home prices cause consumers to feel flush even if their incomes haven’t changed.